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Markets fear US inflation data

INFLATION figures to be published on both sides of the Atlantic this week are seen by the markets as crucial to determining how long the current period of extreme stock-market turbulence will last.

American inflation figures, out on Wednesday, follow Federal Reserve chairman Ben Bernanke’s warning that he is unhappy with present levels. Headline inflation is at 3.5% and “core” inflation, excluding food and energy, is 2.3%.

Attention will focus on what happens to core prices. In April they rose by 0.3% and analysts have pencilled in a 0.2% rise for May. Anything more would rock the markets and add to concerns that this month’s expected rise in the key Fed Funds rate from 5% to 5.25% will not be the last in the cycle.

Markets have been unsettled by what they see as mixed signals from the new Fed chief, who took over from Alan Greenspan earlier this year.